Why the Market is Down on What Looks Like Positive Jobless News

Mar 4, 2011

RUSH: Why is the market down? What is it now? Let’s wait here. Doo-dee-doo-doo. It’s down 111. Why is the stock market down? We finally have unemployment under 9%. Remember, now, the magic number is 8% in terms of Obama reelection, the magic number of unemployment is 8%. (interruption) Well, yeah, but… Well, let’s assume they’re not bogus. Since everything in politics is perception, if you get 8.9% unemployment — and by the way, the number of jobs is 192,000. Now, we would have to create 192,000 a month from now until the election to get it down to 8%. The numbers are bogus because the only way you can get from 9.4 to 9.1% is by reducing the total number of jobs available, the entire pool.

The regime has just done that in the past three months. They have just systematically decided on a whim to say, ‘Yeah, well, unemployment is pretty big out there, but there are also not that many jobs to be found as there used to be: The total number of jobs available,’ and they don’t count that as any kind of an economic failure. It just happens to be the latest statistic. So if you have a smaller number, a smaller total number of possible jobs to have in the country to acquire, then of course the number of people looking for work (coupled with those who have given up who don’t get counted) then you’re obviously gonna be able to report a smaller unemployment number.

If the number of available jobs to be had — and it’s been cut by significant number, 20%. If that hadn’t happened, unemployment would still be in the mid-nines It would be close to ten. Gallup has been saying unemployment has gone up. Gallup saying their unemployment number is 10.3%. But aside from all that, there are real economic reasons why the market (which is composed of people with skin in the game) are not rejoicing here, and there are two primary factors. One is that with unemployment going down, more people working, there’s the automatic fear of inflation. Remember, this started during the Clinton years.

I’d scratch my head. Every time there was good economic news, the experts were scared to death because it was all gonna lead to inflation — and inflation was the number one bogeyman they were trying to keep in check. And it still is. There also is the fear that more demand, with more people working, is going to cause the oil price to go even higher (more on that in a moment) and this is all going to lead to interest rates rising as they attempt to keep a lid on inflation. Now, if you are in the financial services game, money has been free. You’ve been able to get money from your bank, interchangeable, free money.

That’s why it hasn’t been lent. It’s not that people don’t trust the people that want to borrow the money (well, not entirely). It’s that if you can get money for practically free, and then invest in your bank or a financial institution, invest that money in your own growth opportunity, why lend it? Why lend it out to somebody who is a risk at whatever percentage when you got zero cost on the money. So these people now fear interest rates going up; which, when you’ve been playing around at zero cost of money and all of a sudden it starts costing something, that’s a big shock. So those are the three primary reasons why the market is not reacting as common sense would tell us it should be.

‘Oh, wow!’ What would the common sense reaction be? ‘Oh, wow! Cool! Finally jobs coming back. This is what we’ve been looking for ever since the Porkulus bill.’ You would think universal happiness. Unh-uh. It just isn’t the case out there. Here’s what I was referring to earlier: Since January the Department of Labor has been saying that there are fewer people in the country. They have reduced the size of the labor market. So, in addition to there being fewer jobs overall, there are fewer people seeking that number of jobs, which means a lower unemployment rate (or a higher employment rate, depending on how you wish to look at it). So they reduce the size of the workforce, they kept the same number of jobs, and that makes the rate of employment go up.

That’s what Snerdley meant. He didn’t know why, but he instinctively knew the numbers are bogus. That’s why. They’re arguing with the ‘universe’ numbers; they’re arbitrarily changing them on their own whim. So I have a friend who lives in Malibu. I got a note. ‘Hey, Rush, you were talking yesterday about gasoline prices. In Malibu at ten o’clock Thursday morning, $3.99 for regular. At three in the afternoon, it was $4.09 for regular. At 11 o’clock Thursday it was $4.11.’ So it had gone in less 24 hours from $3.99 up to $4.11. The gasoline price is skyrocketing. Now, at what point…?

By the way, the Drive-Bys are just ecstatic. You could have predicted this. The Drive-Bys are in unmitigated glee over the jobs news — and over here is the gas price. They’re not gonna go with the gasoline price increase. We pointed this out yesterday and the day before. If this were Bush, I mean, can you imagine? When Bush was president and the unemployment rate was 4.75%, do you ever remember the giddiness about that that there is today over 8.9%? No! Likewise, they’re ignoring the rise in gasoline prices.

BREAK TRANSCRIPT

RUSH: Something else about this unemployment business and all these ‘new jobs.’ Just another contrast for you. You remember during the Bush years when the unemployment rate was good, like 4.7% (which, in our system, is statistically full employment)? It was 4.7 to 5% unemployment. Remember all the stories about how most of those jobs were not any good? They were ‘hamburger-flipper jobs’ and they really weren’t paying people health care benefits. No matter what the news was — and especially the better the overall news was — the more meaningless it had to be, according to the Drive-By Media. ‘They’re all hamburger-flipper jobs!’ Now we just had 192,000 jobs created. That’s the story in February. Are we reading anywhere that they’re just hamburger-flipper jobs? No! Apparently every job that people are getting, fantastic, high-paying, no-show jobs, not these hamburger-flipper jobs! No, these Obama jobs, why, they’re really, substantiating, meaningful jobs, apparently.

Again, just to chronicle for you the difference in the way the media reports all of this.

BREAK TRANSCRIPT

RUSH: You know, we just sit here and accept the fact, ‘Okay, people have stopped looking for work.’ How do they know? ‘It’s the government.’ I want to know how they know. I’ve never seen that explained. Maybe some of you in the audience know how the number is arrived at. Is it a wild guess? Is it an estimate? And the reason I want to know this right now is because, remember, that magic number of 8%. No president, except FDR, has been reelected with the unemployment number over 8%. That’s why 8% is magic. Here, let’s go to the audio sound bites. I’ll show you what I’m talking about. That 8% being magic, the Drive-Bys are all excited — they’re orgasmic — over this now. Audio sound bite three first, a montage here of State-Run Media glee over this jobs report today.

CNN ANNOUNCER: (music under) This is CNN breaking news!

ALI VELSHI: (music under) The February jobs report. We have very good news.

CHRISTINE ROMANS: Finally! The unemployment rate fell to 8.9%!

ALI VELSHI: (music under) Wow!

ROBIN MEADE: Music to the ears, isn’t it? So unemployment rate dropped. Good thing two months in a row.

CAROL COSTELLO: Jobs numbers are out and they bring some good news!

DICK DURBIN: It is good to break the barrier of 9%!

MARK HAINES: Unequivocally, a good report! This is an excellent, excellent, report! Great, great news on the jobs front!

ALISON KOSIK: A strong jobs report! The February number shows the job market is at a turning point!

JOE SCARBOROUGH: (newsroom noise) 8.9% IS A political number! That’s very good for President Obama.

RUSH: Yeah, that’s all that matters: It’s a good number for President Obama. Did you hear that at the beginning? It was Ali Velshi at CNN. ‘This is CNN breaking news! Unemployment 8.9%!’ Yeah, let’s have a party. The Dow Jones Industrial Average down 159. Why? I explained that in the first hour. If this is such great news, how come people with skin in the game are getting out of the market today? I’ll repeat it very quickly: More employment means more demand on energy and gasoline, higher gas prices (not good); and a higher interest rates or rising interest rates (not good when interest rates for lending institutions have been around zero). So it’s a significant change.

That’s why this is not inspiring a lot of confidence. Now, here’s Rick Santelli on CNBC’s Squawk Box today. During a discussion about the unemployment rate he got a question here from one of their reporters. ‘This seems pretty much in line with what the expectations are for the Federal Reserve here, right, Rick?’

SANTELLI: In terms of the unemployment rate, our panel’s a lot smarter about all the algorithms and the calculations than I am, but with the baseline shifts and the revisions, you know, I think U6 is good news. But the ebbing and flowing? I just can’t be as happy breaking the 9% as I would have been if this had occurred before last month with all the changes to these numbers. I have lost my GPS. I think the unemployment rate is a very disingenuous piece of information. No conspiracy. It’s just the way they do it.

RUSH: Now, what he’s talking about here, he would rather see this 8.9% a few months ago, because that’s before they started just arbitrarily reducing the number of jobs available. That’s what he’s talking about. And we had the story yesterday from IBD: Job openings are down 30%. Job openings, meaning available jobs, are down 30%. Well, if we’re gonna take the total job universe number and reduce it by 30%, of course it’s going to appear that more people are working (particularly if you add 192,000 jobs). So he’s covered himself here, ‘No conspiracy, no conspiracy, that’s just the way they do it.’

Well, there is one if you ask me. A strict definition of conspiracy is people have gotten together and conspired here to have some good news reported, fine and dandy. But central to it is the number of people who have stopped looking for work. Maybe they do it following Oprah’s rating. If Oprah’s ratings go down, fewer people are looking for work. I don’t know. There’s gotta be an answer. If Oprah’s ratings have gone up, then there are more people who have given up looking for work. If Oprah’s ratings have gone down, then there are more people who are looking for work — meaning Oprah’s show is less interesting to people and they gotta find something to do during the day other than watch Oprah, which means maybe go out and find a job.